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Chapter 16 Statement of Cash Flows Notes

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Accounting Chapter 16: Statement of Cash Flows I. Reporting Cash Flows Statement of cash flows: Reports a company’s cash inflows and outflows for a period ➢ Provides useful information about a company’s ability to: 1. Generate cash from operations 2. Maintain and expand its operating capacity 3. Meet its financial obligations 4. Pay dividends ➢ Used to evaluate past operations and plan future investing and financing activities ➢ Used by external users such as investors and creditors to assess a company’s profit potential and ability to pay its debt and to pay dividends ➢ Statement of cash flows reports three types of cash flow activities 1. Cash flows from operating activities: Cash flows from transactions that affect the net income of the company a. Ex: Purchase and sale of merchandise by a retailer 2. Cash flows from (used for) investing activities: Cash flows received from or used for transactions that affect investments in noncurrent assets of the company a. Ex: Purchase and sale of fixed assets (equipment and buildings) 3. Cash flows from (used for) financing activities: Cash flows received from or used for transactions that affect the debt and equity of the company a. Ex: Issuing or retiring equity and debt securities Statement of Cash flows: Cash flows from operating activities $XXX Cash flows from (used for) investing activities XXX Cash flows from (used for) financing activities XXX Increase (decrease) in cash $XXX Cash at the beginning of the period XX ...
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